Is Your Financial "Go Bag" Packed and Ready? the payment of the face value of a bond or CD by the issuer, this can be due to the securities reaching maturity date, or because the issuer redeemed the securities prior to maturity due to a call or other form or redemption, the act of an issuer calling, or purchasing a fixed-income security from the holder, generally at face value, prior to the stated maturity date, debt obligations of the U.S. government that are issued at various intervals and with various maturities; revenue from these bonds is used to raise capital and/or refund outstanding debt; since Treasury securities are backed by the full faith and credit of the U.S. government, they are generally considered to be free from credit risk and thus typically carry lower yields than other securities; the interest paid by Treasuries is exempt from state and local tax, but is subject to federal taxes and may be subject to the federal Alternative Minimum Tax (AMT); U.S. Treasury securities include Treasury bills, Treasury notes, Treasury bonds, zero-coupon bonds, Treasury Inflation Protected Securities (TIPS), and Treasury Auctions. Here are 13 of the best stocks to own should President Donald Trump wi…. Tax risks Depending upon eligibility, you may be able to access other share classes that feature lower sales charges and/or annual expenses. Sales charges can vary. Please see our section on Tax risks for more details. The Northern High Yield Municipal Fund (NHYMX, $8.68) is one of the smaller municipal bond mutual funds out there. Talk with your Schwab Financial Consultant or call 800-355-2162. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. While municipal bonds can offer attractive effective yields and can be a way to generate tax-free income, they may not be right for investors in every tax bracket or for every type of account. Has its credit rating been maintained or strengthened over a period of time? These bonds can also be referred to as market discount bonds, particularly when the amount of the discount exceeds a certain calculated amount specified under the Internal Revenue Code. With this in mind, many investors may benefit from taking an additional look at potential municipal bond investments. Revenue sources risk But the heavy diversification of MUB does help to defray some risks, and the low fees allow you to keep more of your returns. SHYD is the opposite: It focuses on lower-quality muni bonds, but of shorter durations. Information on this site is for general informational purposes only and should not be considered individualized recommendations or personalized investment advice. These funds tend to have relatively stable share prices, and higher than average yields. Learn to Be a Better Investor. For 2020, will you have to pay alternative minimum tax? It is strongly recommended that you consult with a financial adviser before committing to purchasing municipal bonds. Bonds issued to finance things like stadiums, replenishment of a municipality’s underfunded pension plan, or investor-led housing are a few examples of issues that would not qualify for federal tax exemption. Comparison of Treasury Bonds & Municipal Bonds, Advantages & Disadvantages of Junk Bonds & Leverage, How to Check Status of a State Tax Refund in Alabama, Charles Schwab: Not Always Tax Free: 7 Municipal Bond Tax Traps.
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